How a Seven-Building Co-op Replaced10 Boilers for $4 Million – Without Loans

By Tom Soter

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July 18, 2012 — “It was a big deal, a big undertaking,” says Jay Silverberg, principal in Zenith Properties. He’s not kidding, either: take a 21-member board in a seven-building co-op complex, add a $4 million project to convert 10 boilers in three boiler rooms from No. 6 heating oil to natural gas, factor in Housing Preservation and Development (HPD) involvement because it’s a Mitchell-Lama (subsidized) property, and consider that HPD restrictions prohibit loans – and the undertaking doesn’t just seem big. It seems impossible.

Enter Kevin Duffy, an account executive at Hess, a natural gas company. He thought he could make a deal with the Brooklyn-based co-op, officially known as the Lindsay Park Housing Co-op, a 2,702-unit property populated by retirees on fixed incomes and younger professionals who bought in more recently. “Kevin is responsible for putting the package together,” reports Silverberg, who has been the on-site manager for 17 years.

Duffy pointed out to the board that the political climate couldn’t be better for an energy-saving project. It was 2010 and the city was pushing the idea of buildings “reducing their carbon footprint.” To do that, building owners were put on notice that No. 4 and No. 6 fuel oil were on the way out.

The board took the deal because it did not want to assess the shareholders. The members spent many meetings discussing the alternatives. “HPD doesn’t allow us to secure a loan on the property, so our options are very limited,” says Silverberg. “The board took a tremendous amount of time on it,” he adds. “They are very, very proactive. They took a huge amount of time to educate themselves on what was involved in it, what the components of the projects would be both financially and in implementation. They didn’t take it lightly.”

Hess provided the documentation needed for Lindsay Park to take advantage of roughly $227,000 in New York State Energy Research and Development Authority incentives for converting from fuel oil to natural gas as well as a $200,000 rebate from National Grid, payable upon completion, for the installation of natural gas piping.

The gas company handled the conversion from start to finish, providing turnkey project management and funding as part of a natural gas supply agreement, which eliminates the need for upfront capital or bank financing. “Hess is basically financing the whole conversion and we’re basically paying them a fixed rate over a five-year period, which will basically pay for the cost of gas as well as the debt service on the financing for the actual conversion,” says the manager. Without that, Silverberg admits it would have been very difficult to raise the needed funds.

All 21 members took part in the deliberations, Silverberg says, and the process was kept on track through the skilled leadership of nine-year veteran president Cora D. Austin. “Cora is a remarkably strong leader,” Silverberg notes. “She asks the right questions; she let everyone have a say.”

After raising the money, the board had to get approvals from HPD. In the final agreement, Lindsay Park will use natural gas supplied by Hess for its seven buildings, well ahead of local legislative requirements. The project is expected to reduce Lindsay Park’s annual energy costs by roughy 30 percent after five years with no upfront capital expenditure.

Silverberg, who is pleased with how the nearly two-year-long undertaking turned out, takes issue with only one point, a characterization made by a reporter recently: “HPD felt we were going to set a precedent for future conversions of large Mitchell-Lamas. But we weren’t guinea pigs,” he says forcefully. “I’d like to say we were pioneers, trailblazers, if you will.”

NEIGHBORHOOD

Williamsburg, Brooklyn

VALUE

PROPERTY TAXES

Estimated Market Value: $2,269,000

2012/13 Taxable Value: $1,021,050

THE VISION THING

Not everyone can buy into the Lindsay Park Housing Co-op. The fixed-income Mitchell-Lama, a seven-building, 2,702-unit complex, was built between 1964 and 1967. The property has a lot of senior citizens who were there at the start, and now includes a “younger demographic,” as well, according to longtime manager Jay Silverberg, a principal in Zenith Properties. He adds that about half of the 21-member board is made up of retirees, “who have time to serve on the board. But we do have a younger component, as well, which is very diverse ethnically.”

Silverberg, who has managed the property since 1995, says the primary attraction of Lindsay Park is “affordability” – the taxes paid on units are limited – but because the property is a Mitchell-Lama, potential buyers have to get on a restricted waiting list. That’s not easy. And don’t expect to make a killing on resales, either: the purchase prices are not market-driven but conform to a formula put into place by the city. In the end, not everyone can get in – but those who do are happy to be there.